On Wednesday, March 31, Apple stock shot straight up. Shares of the Cupertino company shook off two consecutive days of significant negative returns to end the first quarter of 2021 on firm ground.
Valued at around $122 per share and $2.05 trillion in total, Apple still failed to fully recover from a rough start to the year. However, the stock has peeled off from its year-to-date low of $116 apiece, reached in early March (when the Apple Maven emphasized the buy-on-dip opportunity), as Apple investors probably breathed a sigh of relief.
Wall Street bullishness on Apple Car
Probably the biggest catalyst of the day that sent Apple shares higher was UBS’ stock rating upgrade. The investment bank and research firm abandoned its “neutral” stance and joined the bullish majority on Wall Street. The analyst raised his price target on Apple to $142, for an 18% upside opportunity from March 30 levels.
At the core of UBS’ investment thesis is the long-anticipated Apple Car. Here is what the analyst had to say about the opportunity:
“While our analysis of iPhone procurement and mix drives our fiscal 2022 estimates higher and our ‘Core’ value to $128 (from $115), our analysis of the auto market and Apple’s multi-year investment in the industry (self-driving car licenses and LiDAR patents) suggests to us that Apple’s auto optionality is worth at least an incremental $14 per share.”
This has been one of the first instances in which Wall Street attached a price tag to the Apple Car opportunity. The bank believes, therefore, that 10% of Apple’s equity value in the foreseeable future can be attributed to the autonomous vehicle segment. This would be enough to make the new car one of Apple’s most valuable product from the start, with probably quite a bit of long-term potential.
UBS goes further in the break down of its analysis. It claims that Apple’s battery electric vehicle (BEV) could gobble 5% of market share. This would probably not even make Apple a top 3 player in the BEV space, since Volkswagen, Mercedes-Benz, and Audi control at least 9% of the market each.
Other factors driving Apple stock
Not all was about UBS’ research note. The market seemed to perceive the tech sector as a beneficiary of US President Joe Biden’s $2.3 trillion infrastructure plan, especially the $174 billion investment to win the electric car market. Tesla stock, for example, skyrocketed on the news.
To a lesser extent, the drop in the 10-year treasury yield on Wednesday morning, from 1.72% to just north of 1.70% by noon, probably helped growth stocks like Apple as well. Maybe not a coincidence, Apple shares climbed the most while rates were declining, and lost some steam as rates rebounded a bit in the afternoon.
Is UBS right in its estimate of the value of the Apple Car opportunity? I asked Twitter for a second opinion, and here are the responses:
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)